Andrew Rose | University of California, Berkeley (original) (raw)

Papers by Andrew Rose

Currency and banking crises are potholes on the road to financial liberalization. It is relativel... more Currency and banking crises are potholes on the road to financial liberalization. It is relatively rare for them to cause a vehicle to break an axle-to bring the process of growth and liberalization to an utter and extended halt-but the flats they cause can result in significant losses of time and output and set back the process of policy reform.

Abstract This paper reviews the recent literature that quantitatively assesses the effect on inte... more Abstract This paper reviews the recent literature that quantitatively assesses the effect on international trade of membership in the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT). In my 2004a paper, I show that a straightforward look at the data does not find a strong effect of GATT/WTO membership on bilateral trade.

In this paper, I develop and apply a simple methodology to estimate the expected (intertemporal) ... more In this paper, I develop and apply a simple methodology to estimate the expected (intertemporal) marginal rate of substitution (EMRS). The EMRS is an economic variable of considerable interest. More importantly, when different series for the EMRS are estimated for different markets (such as the New York and Toronto stock exchanges), comparing these estimates provides a natural yet powerful test for integration between markets. The method is novel in that it exploits information in asset-idiosyncratic shocks.

ABSTRACT The effects of Regional Trade Agreements (RTAs) are disputed. In this paper, we assess t... more ABSTRACT The effects of Regional Trade Agreements (RTAs) are disputed. In this paper, we assess these effects using capital market data and an event-study approach, using a daily data set covering a thousand announcements spanning over eighty economies and a hundred RTAs over twenty recent years. We measure the effects of news concerning RTAs on the returns of national stock markets, adjusted for international stock market movements.

ABSTRACT Using a panel of 21 OECD countries and 40 years of annual data, we find that countries w... more ABSTRACT Using a panel of 21 OECD countries and 40 years of annual data, we find that countries with similar government budget positions tend to have business cycles that fluctuate more closely. That is, fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with more synchronized business cycles. We also find evidence that reduced fiscal deficits increase business cycle synchronization.

ABSTRACT This paper develops a simple but general methodology to estimate the expected intertempo... more ABSTRACT This paper develops a simple but general methodology to estimate the expected intertemporal marginal rate of substitution or" EMRS", using only data on asset prices and returns. Our empirical strategy is general, and allows the EMRS to vary arbitrarily over time. A novel feature of our technique is that it relies upon exploiting idiosyncratic risk, since theory dictates that idiosyncratic shocks earn the EMRS.

Three Waves of Currency Crises during the 1990s Currency crises are among the most dramatic of al... more Three Waves of Currency Crises during the 1990s Currency crises are among the most dramatic of all economic events. Interest rates rise to exorbitant levels and billions change hands on the markets while central bank governors and finance ministers work their cell phones to head off the panic. At the time, speculative attacks–I use the expression synonymously with currency crises–seem an irrational phenomena.

Much research on international trade patterns focuses on deep primitive causes of trade, such as ... more Much research on international trade patterns focuses on deep primitive causes of trade, such as differences in national factor endowments, preferences, or technologies. In much of my recent research in the area, I examine less traditional causes of trade flows. In particular, I've tended to focus mostly on the macroeconomic determinants and consequences of trade.

Summary In this article, the gravity model of international trade was used to show that two count... more Summary In this article, the gravity model of international trade was used to show that two countries with a common currency trade more. The effect is statistically significant and economically large. Two countries which use the same currency trade much more than comparable countries with their own currencies; the best estimate is over three times as much.

Abstract This paper develops a simple methodology to test for asset integration, and applies it w... more Abstract This paper develops a simple methodology to test for asset integration, and applies it within and between American stock markets. Our technique relies on estimating and comparing expected risk-free rates across assets. Expected risk-free rates are allowed to vary freely over time, constrained only by the fact that they must be equal across (risk-adjusted) assets in wellintegrated markets.

Abstract This short paper reviews the recent literature linking monetary union, international tra... more Abstract This short paper reviews the recent literature linking monetary union, international trade, and business cycle synchronization. I survey the literature using the quantitative technique of metaanalysis, which allows me to estimate the effects of EMU taking into account the entire extant literature. Twenty-six recent studies have investigated the effect of currency union on trade, using actual European data of relevance.

Abstract: This paper applies the Meese-Rogoff (1983a) methodology to the stock market. We compare... more Abstract: This paper applies the Meese-Rogoff (1983a) methodology to the stock market. We compare the out-of-sample forecasting accuracy of various time-series and fundamentals-based models of aggregate stock prices. We stick as close as possible to the original Meese-Rogoff sample and methodology.

We develop a procedure to rank-order objects using censored panel data sets. We illustrate this b... more We develop a procedure to rank-order objects using censored panel data sets. We illustrate this by ranking countries and commodities using disaggregated American import data and find evidence that countries and commodities can be ranked. Countries habitually begin to export goods to the United States according to an ordering; goods are also exported in order. We estimate these orderings using a methodology, that takes account of the fact that most goods are not exported by most countries in our sample.

Abstract: We compare the duration and performance of different monetary regimes, especially the c... more Abstract: We compare the duration and performance of different monetary regimes, especially the contrast between countries those that fix exchange rates and those that target inflation. Inflation targeting is a more durable policy; no country has yet been forced to abandon an inflation target, while many have abandoned fixed exchange rates.

Abstract Twenty-four recent studies have investigated the effect of currency union on trade, resu... more Abstract Twenty-four recent studies have investigated the effect of currency union on trade, resulting in 443 point estimates of the effect. This paper is a quantitative attempt to summarize the current state of debate; meta-analysis is used to combine the disparate estimates.

The enormity of the current financial collapse raises the question whether the crisis could have ... more The enormity of the current financial collapse raises the question whether the crisis could have been predicted. This is the second of two Economic Letters on the topic. This Letter examines research suggesting that early warning models would not have accurately predicted the relative severity of the current crisis across countries, casting doubt on the ability of such models to forecast similar crises in the future.

The 1992 and 1993 crises in the European Monetary System redirected attention toward proposals fo... more The 1992 and 1993 crises in the European Monetary System redirected attention toward proposals for regulating the foreign exchange market. Academics (including two authors of this paper) argued for a Tobin tax on foreign exchange transactions or the imposition of non-interest-bearing deposit requirements on banks with open positions in foreign exchange as a way of smoothing the transition to European monetary union (EMU)(see Eichengreen and Wyplosz 1993).

Abstract This paper examines the macroeconomic impact of tariffs. The effects of unilateral tarif... more Abstract This paper examines the macroeconomic impact of tariffs. The effects of unilateral tariff changes are reviewed in a variety of theoretical models. Three different sets of data are consistent with the hypothesis that tariff rates have no significant effect on a system consisting of the real exchange rate, the real trade balance, and real output (both foreign and domestic).

Currency and banking crises are potholes on the road to financial liberalization. It is relativel... more Currency and banking crises are potholes on the road to financial liberalization. It is relatively rare for them to cause a vehicle to break an axle-to bring the process of growth and liberalization to an utter and extended halt-but the flats they cause can result in significant losses of time and output and set back the process of policy reform.

Abstract This paper reviews the recent literature that quantitatively assesses the effect on inte... more Abstract This paper reviews the recent literature that quantitatively assesses the effect on international trade of membership in the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT). In my 2004a paper, I show that a straightforward look at the data does not find a strong effect of GATT/WTO membership on bilateral trade.

In this paper, I develop and apply a simple methodology to estimate the expected (intertemporal) ... more In this paper, I develop and apply a simple methodology to estimate the expected (intertemporal) marginal rate of substitution (EMRS). The EMRS is an economic variable of considerable interest. More importantly, when different series for the EMRS are estimated for different markets (such as the New York and Toronto stock exchanges), comparing these estimates provides a natural yet powerful test for integration between markets. The method is novel in that it exploits information in asset-idiosyncratic shocks.

ABSTRACT The effects of Regional Trade Agreements (RTAs) are disputed. In this paper, we assess t... more ABSTRACT The effects of Regional Trade Agreements (RTAs) are disputed. In this paper, we assess these effects using capital market data and an event-study approach, using a daily data set covering a thousand announcements spanning over eighty economies and a hundred RTAs over twenty recent years. We measure the effects of news concerning RTAs on the returns of national stock markets, adjusted for international stock market movements.

ABSTRACT Using a panel of 21 OECD countries and 40 years of annual data, we find that countries w... more ABSTRACT Using a panel of 21 OECD countries and 40 years of annual data, we find that countries with similar government budget positions tend to have business cycles that fluctuate more closely. That is, fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with more synchronized business cycles. We also find evidence that reduced fiscal deficits increase business cycle synchronization.

ABSTRACT This paper develops a simple but general methodology to estimate the expected intertempo... more ABSTRACT This paper develops a simple but general methodology to estimate the expected intertemporal marginal rate of substitution or" EMRS", using only data on asset prices and returns. Our empirical strategy is general, and allows the EMRS to vary arbitrarily over time. A novel feature of our technique is that it relies upon exploiting idiosyncratic risk, since theory dictates that idiosyncratic shocks earn the EMRS.

Three Waves of Currency Crises during the 1990s Currency crises are among the most dramatic of al... more Three Waves of Currency Crises during the 1990s Currency crises are among the most dramatic of all economic events. Interest rates rise to exorbitant levels and billions change hands on the markets while central bank governors and finance ministers work their cell phones to head off the panic. At the time, speculative attacks–I use the expression synonymously with currency crises–seem an irrational phenomena.

Much research on international trade patterns focuses on deep primitive causes of trade, such as ... more Much research on international trade patterns focuses on deep primitive causes of trade, such as differences in national factor endowments, preferences, or technologies. In much of my recent research in the area, I examine less traditional causes of trade flows. In particular, I've tended to focus mostly on the macroeconomic determinants and consequences of trade.

Summary In this article, the gravity model of international trade was used to show that two count... more Summary In this article, the gravity model of international trade was used to show that two countries with a common currency trade more. The effect is statistically significant and economically large. Two countries which use the same currency trade much more than comparable countries with their own currencies; the best estimate is over three times as much.

Abstract This paper develops a simple methodology to test for asset integration, and applies it w... more Abstract This paper develops a simple methodology to test for asset integration, and applies it within and between American stock markets. Our technique relies on estimating and comparing expected risk-free rates across assets. Expected risk-free rates are allowed to vary freely over time, constrained only by the fact that they must be equal across (risk-adjusted) assets in wellintegrated markets.

Abstract This short paper reviews the recent literature linking monetary union, international tra... more Abstract This short paper reviews the recent literature linking monetary union, international trade, and business cycle synchronization. I survey the literature using the quantitative technique of metaanalysis, which allows me to estimate the effects of EMU taking into account the entire extant literature. Twenty-six recent studies have investigated the effect of currency union on trade, using actual European data of relevance.

Abstract: This paper applies the Meese-Rogoff (1983a) methodology to the stock market. We compare... more Abstract: This paper applies the Meese-Rogoff (1983a) methodology to the stock market. We compare the out-of-sample forecasting accuracy of various time-series and fundamentals-based models of aggregate stock prices. We stick as close as possible to the original Meese-Rogoff sample and methodology.

We develop a procedure to rank-order objects using censored panel data sets. We illustrate this b... more We develop a procedure to rank-order objects using censored panel data sets. We illustrate this by ranking countries and commodities using disaggregated American import data and find evidence that countries and commodities can be ranked. Countries habitually begin to export goods to the United States according to an ordering; goods are also exported in order. We estimate these orderings using a methodology, that takes account of the fact that most goods are not exported by most countries in our sample.

Abstract: We compare the duration and performance of different monetary regimes, especially the c... more Abstract: We compare the duration and performance of different monetary regimes, especially the contrast between countries those that fix exchange rates and those that target inflation. Inflation targeting is a more durable policy; no country has yet been forced to abandon an inflation target, while many have abandoned fixed exchange rates.

Abstract Twenty-four recent studies have investigated the effect of currency union on trade, resu... more Abstract Twenty-four recent studies have investigated the effect of currency union on trade, resulting in 443 point estimates of the effect. This paper is a quantitative attempt to summarize the current state of debate; meta-analysis is used to combine the disparate estimates.

The enormity of the current financial collapse raises the question whether the crisis could have ... more The enormity of the current financial collapse raises the question whether the crisis could have been predicted. This is the second of two Economic Letters on the topic. This Letter examines research suggesting that early warning models would not have accurately predicted the relative severity of the current crisis across countries, casting doubt on the ability of such models to forecast similar crises in the future.

The 1992 and 1993 crises in the European Monetary System redirected attention toward proposals fo... more The 1992 and 1993 crises in the European Monetary System redirected attention toward proposals for regulating the foreign exchange market. Academics (including two authors of this paper) argued for a Tobin tax on foreign exchange transactions or the imposition of non-interest-bearing deposit requirements on banks with open positions in foreign exchange as a way of smoothing the transition to European monetary union (EMU)(see Eichengreen and Wyplosz 1993).

Abstract This paper examines the macroeconomic impact of tariffs. The effects of unilateral tarif... more Abstract This paper examines the macroeconomic impact of tariffs. The effects of unilateral tariff changes are reviewed in a variety of theoretical models. Three different sets of data are consistent with the hypothesis that tariff rates have no significant effect on a system consisting of the real exchange rate, the real trade balance, and real output (both foreign and domestic).